The episode shines a spotlight on a longstanding trend of embedded advertising and sponsored content that has been picking up steam in recent years. As advertising dollars have migrated away from news organizations, the search for new business models has also meant pushing the boundaries between the newsroom and ad sales. There are some compelling arguments about why journalists need to understand the business side of things, but the Atlantic episode illustrates that the business side also needs to understand the newsroom.

The Rise of Pay-For-Play News

To be fair, while the Scientology ad looked exactly like an Atlantic article, the piece was flagged as sponsored content at the top, with a pop-up explanation of what that means. The Atlantic did more than many TV stations do when they present paid ads as news stories.

Free Press has been working since 2006 to curtail the rise of fake news on local TV. Such segments run afoul of Federal Communications Commission disclosure regulations, and we have filed complaints at the FCC that document more than 100 cases of undisclosed Video News Releases, which are produced by PR firms and ad agencies. So far the FCC has acted on only a handful of these cases, imposing minor fines.

The FCC’s passivity is a surprise given that its own report on the information needs of communities specifically called out these “pay-for-play” arrangements. The report highlights a case in which a hospital paid a local TV station $100,000 to air “medical breakthrough” segments that were little more than ads for their own medical services. In addition, the report cites a survey that found more than 12 percent of local TV stations considering product placements in their news programming. James Rainey at the L.A. Times has called local TV a “hotbed” for advertiser-driven content.

News organizations that make sponsored content part of their business strategy need to do better when it comes to disclosure and transparency. I wrote recently about Taboola and Outbrain, two firms that create sponsored content and paid recommendations. Their widgets appear on websites for CNN, Fox, the New York Times, Time, the Wall Street Journal and other news organizations. The paid content and links appear at the end of actual news stories.

While not necessarily a bad thing in and of itself, how these widgets are implemented across sites varies wildly. Often the line between news content and sponsored content is blurry at best.

It’s About Trust

It’s a Catch-22 for news organizations and advertisers. Advertisers want their sponsored content to have the look and feel of the news organization — similar in tone, visuals, etc. In this way, they’re not just buying placement; they’re also buying the right to piggyback on the newsroom’s brand. The goal is to make the advertisement as indistinguishable as possible from other news on the site. But can news organizations sell that kind of access without misleading their readers?

When judging the value of sponsored content, news organizations have to weigh the cost to their brand and their audiences’ trust. The Atlantic’s decision to pull the ad so quickly suggests that it ultimately valued its brand and its readers more than any revenue the ad might have generated. However, by placing the ad and then pulling it, the Atlantic has now hurt its relationship with readers and sent an unsettling message to other potential advertisers.

That’s why it’s important to have these kinds of discussions up front both inside the newsroom and with readers. In general, I don’t like sponsored content, but I understand why news organizations are experimenting with it and I think there are ways to do it better.

Newsrooms need to engage readers and build trust through transparency and open discussion. The Atlantic made things worse by editing and moderating comments in a way that seemed to suggest that even the comments section on its site was for sale.

Nonprofit journalism and public media outlets aren’t immune from these debates as they experiment with their own models of underwriting and sponsorships. Media organizations ought to be testing new ideas for ads and thinking about new ways to raise revenue. But they shouldn’t auction off their relationships with readers to the highest bidder.

UPDATE: Roughly 24 hours after the Church of Scientology ad went live, the Atlantic issued a formal apology that reads, in part, "We screwed up. It shouldn't have taken a wave of constructive criticism — but it has — to alert us that we've made a mistake, possibly several mistakes. … We remain committed to and enthusiastic about innovation in digital advertising, but acknowledge — sheepishly — that we got ahead of ourselves. We are sorry, and we're working very hard to put things right."

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